The board of the Central Reserve Bank of Peru (BCRP) agreed today to raise the reference interest rate by 50 basis points to 4.0%, thus continuing with the normalization of the position of monetary politics.
In the decision of the board of directors of the issuing entity, it was taken into account that the twelve-month inflation rate stood at 6.15% in February, temporarily above the target range due to factors such as the increase in international prices of food supplies and fuels, as well as the exchange rate. Meanwhile, the twelve-month inflation rate excluding food and energy stood at 3.26% in February, above the upper limit of the inflation target range.
Likewise, the monetary entity has revised its projection on inflation, since with the significant increase in international energy and food prices so far this year, recently accentuated by international conflicts, it is now estimated that inflation would return to the range in the first half of 2023.
“The downward path of year-on-year inflation would begin in July of this year, due to the reversal of the effect of transitory factors on the inflation rate (exchange rateinternational fuel and grain prices) since economic activity will still be below its potential level,” the BCRP specified in a statement.
Regarding twelve-month inflation expectations, these rose from 3.73% to 3.75%, above the upper limit of the inflation target range. While most indicators of expectations about the economy continue in February in the pessimistic section.
“World economic activity has been recovering, although at a slower pace due to the impact of COVID-19, due to the persistence of bottlenecks in the global supply of goods and services and relative uncertainty associated with the rate of reversal of monetary stimuli in advanced economies. However, the recent international conflicts have increased the uncertainty in the recovery of the world economy and in the magnitude of the upward pressures on the prices of commodities”, the issuing entity pointed out.
Finally, the BCRP board affirmed that it is paying special attention to the new information regarding inflation and its expectations and the evolution of economic activity to consider, if necessary, additional modifications in the monetary policy position that guarantee the return of inflation to the target range in the projection horizon.
Source: Larepublica
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